GALVIN HUDSON V. COMMISSIONER
20 T.C. 734 (1953)
NATURE OF THE CASE: This was a dispute over the characterization of income. Hudson (P)
challenged a finding of a deficiency in that profits from the settlement of a judgment were
ordinary income.
FACTS: Harahan got a judgment against Cole for $75,702.12. Ps then purchased the judgment
from the residuary legatees of Harahan's estate. Their aggregate cost of the judgment was
$11,004, and this included attorney fees and expenses of $1,004. Cole eventually paid the
sum of $21,150 as a full and final settlement of the judgment. Ps then reported this profit
as a long-term capital gain on their 1945 tax returns. The IRS claimed a deficiency as the
amount was taxable as ordinary income.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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